Tenke Mining Corp - Company Review
Annual results
Mon 16 Feb 98
Company Review
Mr Philip Wright reviews the company
During 1997 Tenke acquired, through its 55% owned subsidiary, the rights to develop the Tenke Fungurume mining concessions; raise $120 million in new equity; commence the rapid development of a bankable feasibility study; and achieve outstanding exploration results. It has also been a year of significant changes in the Democratic Republic of Congo, the location of the company's Tenke Fungurume copper-cobalt deposits.
Investment in Tenke is expected to exceed US$1 billion over the first ten years, bringing with it significant benefits. Tenke considers the production potential of this property to exceed 500,000 tonnes per annum of copper for at least 20 years in addition to being the world's largest cobalt mine. The first major step towards achieving the company's goal is the completion of a bankable feasibility study. Once the feasibility study is complete, the optimal financing strategy can be finalized. The feasibility study is estimated to cost approximately US$26.4 million (including US$2.4 million in-fill drilling) and is expected to be completed in the first half of
1998. When complete, the study will provide capital and operating cost estimates for the project at an initial annual production rate of 100,000 tpa of copper and 8,000 tpa of cobalt metal. It will also provide the estimates necessary for a doubling of production that is planned for year five of the project. Expansions are expected to be financed from internally generated cash flow.
Another major accomplishment has been the proving up of significant additional resources through an exploration program in a 15km long by 3km wide, mineralized area called the Dipeta Syncline. This work resulted in 196 million tonnes of drill indicated resources at a grade of 4.37% Cu and 0.22% Co inferring a new in-situ resource containing 8,600,000 tonnes of copper and 442,000 tonnes of cobalt. These are in addition to the existing resources and represent a near doubling of resource estimates. Total resources now stand at 520 million tonnes at 3.6% Cu and 0.28% Co. This exploration program has cost approximately US$3.6 million and is now on hold pending completion of the feasibility study and initial project developments. The Tenke Fungurume deposits are within two concessions totalling 1,437 sq km in Katanga province, DRC, approximately 175km northwest of Lubumbashi, second largest city of the country.
Initial production is planned at 100,000 tpa of copper with expansion to 200,000 tpa from the fifth year of operation. Cobalt capacity will be expanded to match sales contracts with up to 8,000 tpa planned in the first four years and up to twice this from the fifth year onwards. Preliminary mine plans schedule 85 million tonnes of oxide ore at an average acid-soluble grade of 3.3% Cu and 0.30% Co over an initial 15 year life.
Further extensive reserves are available and production will be
progressively expanded from year five onwards. Further open-pittable oxide reserves will be proven-up and an extensive sulphide resource, underlying the oxide zone, is known to extend well below 500m in the areas tested and over a strike length of up to 100km. Much of the sulphide is accessible by open pit methods.
FINANCIAL
The company recorded a profit for the year ended September 30 1997 of $340,566 as compared to a net loss in 1996 of $738,568.
Consolidated revenues for the year ended September 30 1997 amounted to $3,059,000 compared to $110,000 in the year ended September 30 1996. The increase in consolidated revenue is mainly due to interest received on funds deposited following the increase in equity in the first quarter ended December 31 1996. The company's properties are in the exploration stage and therefore no revenues were generated from operations during the current quarter.
As a result of the effort in setting up and managing the operations in the Congo, general and administrative expenses increased to $2,464,000 in the year ended September 30 1997 from $866,000 in the year ended September 30 1996. The company recorded a gain of $150,000 in the year ended September 30 1996 in relation to part of the consideration for disposal of Colombian assets in 1995. Of this sum, $100,000 was receivable at year end 1996. On May 19 1996, the company accepted 285,714 shares in the purchasing company (PetroSantander Inc) in final settlement of this transaction. These shares are not publicly quoted and are shown in the balance sheet at the
settlement value of $100,000. A dividend of $34,000 was declared in August 1997 on these shares.
Following resolution of a claim relating to unfulfilled work commitments in a relinquished Argentinean interest, a provision of $180,000 has been included in expense for the current year. As at September 30 1997, the company had cash in the amount of $12,674,000 compared to $83,900,000 at the end of the prior year. The decrease is according to expectation following commencement of operations in the Congo. The major expenditure was incurred in relation to operations in the Congo, principally $112,500,000 on acquisition of the Tenke Fungurume concession, $50,000,000 on licence award, $19,600,000 on evaluation and $2,145,000 on purchase of capital assets.
During the year, the company expended $1,262,000 on oil and gas interests in Peru. These expenditures were primarily cash calls made by the concession operator relating to seismic acquisition.
The company has approved a 1998 work program to complete the acquisition of seismic data on the Peruvian property begun in 1996. The company's share of the 1998 budget is $1,200,000. The company incurred costs of $216,000 relating to listing of the special warrants, and incurred a loss on exchange of $380,000 principally relating to the difference in value of Canadian dollar denominated equity raised in September 1996 and converted to US dollars on release from escrow in November 1996 and January 1997. The company has commitments, should it elect to place the Tenke Fungurume
project into production, to pay a further sum of $200,000,000 up to the year 2003.
STATEMENT OF EARNINGS
Year ended September 30
(US$)
1997 1996
Revenues
Interest $ 2,476,022 $ 75,753
Other income 582,802 34,520
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3,058,824 110,273
Expenses
General &
exploration admin (1,886,124) (722,066)
Amortization (65,063) (7,864)
Loss on foreign
exchange (379,599) (3,990)
Interest (133,126) (131,631)
----------- ----------
(2,463,912) (865,551)
Loss on
termination of
concessions (180,000) (22,623)
Gain on sale of
subsidiary - 150,000
----------- ----------
Income/(loss)
before income
taxes 414,912 (627,901)
Income taxes
Current (74,346) (110,667)
----------- ----------
Net income/
(loss) $ 340,566 $ (738,568)
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Income/(loss)
per share $0.01 $(0.06)
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